Google sells Motorola to Lenovo

Nearly two years ago, in May 2012, Google completed its $12.5 billion purchase of Motorola Mobility, one of the largest phone companies in the world. At the time, the new Google-appointed head of the company said that the purpose of the buyout was “to focus Motorola Mobility’s remarkable talent on fewer and bigger bets and create wonderful devices that are used by people around the world” (CNN).

Another often-cited motivation for the purchase was that Google wanted to use Motorola’s considerable cache of patents to defend Android from litigation. After these patents proved mostly toothless in court and the well-received Moto X failed to make much of an impression in the market, however, Google has sold Motorola to Chinese hardware giant Lenovo for $2.91 billion, less than one fourth of the original cost of the company.

Larry Page, the CEO of Google, commented on the deal on Google’s official blog. “We acquired Motorola to help supercharge the Android ecosystem by creating a stronger patent portfolio for Google and great smartphones for users … but the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices. It’s why we believe that Motorola will be better served by Lenovo.” Later in the statement, he was careful to note that Google will maintain control of the company’s patents as weapons to protect Android.

Writer Vere Kopytoff, in an article for Time, argues that Google’s acquisition of Motorola was a “gargantuan mistake” that only a company of Google’s size and strength could sustain. Despite the release of a flagship phone in the form of the Moto X, the company’s revenue fell by nearly one third in the third quarter of last year.

One problem was that Google could not be as aggressive in pushing Motorola’s products because it needed to maintain good relationships with Samsung and other Android manufacturers, who became Google’s competitors when it bought the company. “The realities of the market made [success] nearly impossible,” writes Kopytoff, “Google couldn’t play favorites with Motorola for fear of alienating other handset manufacturers of Android.”

Speculation has now turned to Lenovo, which has now made its second huge buyout of a major American firm’s hardware business. The first was when it bought IBM’s personal computer division in 2005, making it the company to build ThinkPads and other brands associated with Big Blue. In America, the company is famous for its personal computers, but worldwide it sells more mobile phones than PCs, especially in China.

Because it already has numerous Android devices on the market but little recognition as a handset manufacturer, the company is hoping that this purchase will give it an edge in the important American market. Vlad Savov, writing for The Verge, notes, “It all ultimately comes down to having a name that Americans can trust and invest their dollars in. Lenovo has already proven that it can rejuvenate a well-regarded brand with the ThinkPad acquisition, but it has a much bigger challenge on its hands with Motorola.”

This new sale shows that Google has made a mistake, though how costly it will be is yet to be seen. Its inability to turn its Motorola division into one that could create widely desirable products might be more a sign that Samsung and Apple have a corner on the high-end smartphone market at this point. Newcomers to that space, like Lenovo, might have difficulties of their own despite this new purchase.